One of the most valuable points that I encountered was that most credit cards charge a 2.5% Foreign Currency Exchange Fee, which basically means that when you use a credit card outside of Canada, the bank transfers the Canadian funds to the currency of the country that you are spending yous money on (usually the US dollar for us Canadians, but in our case the Australian dollar).

So basically – I buy something from Australia for $10 AUS using my credit card – my credit card company uses the exchange rate (0.95 as of July 21st) to charge $9.53 CAD to my card and then adds another 2.5% (25 cents) to make the total charge to my credit card $9.78 CAD. So essentially the bank is taking 2.5% of every hard earned dollar that I (anyone) spends out of Canada.

Now most of you are probably thinking , whats the big deal? Its only 25 cents. But if you are spending large amounts out of your home country, that amount will add up fast. If we spend $10,000 over 6 months or a year that would be $250! If we are each spending $10,000 in Australia over the next year then that is $500 – just to convert my money to another currency!

Luckily there is a way around this. Now Americans are extra lucky since it appears that they have many more options for credit cards/ rewards points ect. But in Canada I have found 3(sort of 4) credit cards that charge NO FOREIGN EXCHANGE FEE!

They are all offered through Chase:

The Marriott Reward Chase Visa Card

Amazon.ca Rewards Visa Card

Sears Financial Mastercard (also Sears Financial Voyage Mastercard)

Now the best one really depends on what company you would rather collect points on. For travelling I believe that it will be best to worry a little bit less about the rewards system and a little more about the foreign currency conversion fee! Most credit card companies offer rewards closer to 1% of your total spending – not 2.5%, and if you happen to shop/use any of the points you collect then even better!

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The 2.5% charged by most credit cards companies is misunderstood by most people. Yes, it is an extra charge but so is exchanging cash currency. It will be hard to find an exchange place where the spread is less than 5%,thus 2.5% on either end.
The 2.5% charged by credit card companies is actually a bargain.
You did not mention from which exchange rate the 2.5% is charged. Dig a little deeper and you will find the base rate which sort of sits in the middle.

While what you say is true – these cards basically exchange the money for FREE. You can use this card in a foreign country (Australia), AND pay it off in Canadian Dollars, skipping the whole exchange process. So you are still saving that 2.5% most credit cards charge ( or that even higher exchange fee for changing curency ).

Also the rewards on these cards aren`t quite as good as you can find in a regular rewards card. But the money you save from not paying that 2.5% is going to be WAY higher than you will be able to find in actual rewards.

As an example – lets say that these cards will give you 0.5% rewards on any cash spent. This is terrible for a rewards card. When you compare that to a card that can make 2% cash back. But if you minus that you are losing 2.5% cash on EVERY TRANSACTION that you make in a foreign country, it still works out to -0.5% meaning that one of these credit cards will save you a whole 1% of your money when compared to a general credit card..

Just a piece of interesting info : Mastercard and Visa both apply different exchange rates to the transactions.
Between $ CAD and € or $ US and €, the difference is often between 0.5% to 1%, Mastercard being the one that offers the best rates (sometimes even more interesting than interbank rates).

Also don’t forget the Marriott Rewards card has a yearly fee of $120 however gives you a free night at a Marriott hotel and the fee is waived the first year with extra bonus rewards when you sign up, giving you three to four free nights of motels the first year. My wife and I got one recently as we are travelling to the US for a month this year.

When you use a credit card other than those listed here, you are paying two different fees
1. The conversion of your purchase into your ‘home country currency’; this is done using the bank rate that day, for “buy”- you bought the foreign currency to make your purchase
AND
2. The 2.5% “foreign currency fee”. That is a surcharge on the amount of foreign currency you bought. I don’t know who would not want to avoid this- you get no tangible “service” from this fee.
Thanks!

Just a follow up to our getting the Marriot Rewards Chase Visa last fall. Not only did we save the 2.5% foreign currency fee when we used the card to pay our condo fee in Florida for February, but with the bonus for getting the card we have had three free nights already this year and two more this coming week from the points earned, sign up bonus plus the one night stay voucher that you get every year upon renewal as you get one voucher when signing up for the card. So 5 free nights the first year and they waive the $120 fee the first year too! Not sure how long we will keep the card as we also have the Amazon card from Chase but the free night pays for the yearly fee anyhow. We chose hotels for 10000 to 15000 points per night to get the 5 free nights. There are some as low as 7500/night and some for much higher.